Santa Fe Las Campanas- Mortgage Insurance Companies

Another “heads up” on conventional mortgages:  Two mortgage insurance companies are out-of-business, effective Sept 2011:  PMI and RMIC – both previously strong players in the mortgage insurance business.  If you have conventional loans in process and they have mortgage insurance attached to them, you may want to check with your borrowers’ lender to insure the loan will complete as scheduled.  Most lenders work with multiple MI companies, but it won’t hurt to do your homework – just to make sure that ”all is well”, and closing will complete as scheduled.  This may be a sign that mortgage insurance, at least as we know it, may be heading the way of the dinosaurs.  95% loans may be available only through FHA in the near future.  Lenders, of course, may also consider taking the risk themselves, and may more aggressively offer their own product of “lender-paid mortgage insurance”, which usually entails an increase in the interest rate by about .5% to .75%, depending upon LTV.  The biggest problem I see with lender-paid mortgage insurance is that the borrower is committed to the higher interest rate for as long as the borrower is in the loan.  Mortgage insurance could, typically, be dropped after a borrower met certain conditions – dropped sometimes as soon as 24 months after the inception of the loan.  …more to come on this issue.